Finance Minister Nicola Willis says she has sought external advice on a possible break-up of the supermarket duopoly to help accelerate grocery competition.
Willis said the Government was open to a range of “interventions” in the sector, focusing on making it easier for a third national competitor to enter the market.
But the senior minister said she was also open to considering more drastic measures.
“We can’t just wait for another competitor to arrive in order to make the New Zealand grocery sector more competitive sooner. It is possible that more significant reform of the underlying grocery market structure may be required,” she said.
“I am considering a possible structural separation of existing entities in the New Zealand grocery sector. To support this, I have commissioned specialist external advice on ways in which the existing supermarket duopoly could be restructured to improve competition.”
Willis said she sought advice on “demerging existing brands, the potential impacts of structural separation of existing entities, and concepts for how this could be achieved.”
The issue was raised after a damning inquiry into Australia’s supermarkets. (Source: 1News)
In this morning’s announcement, the Finance Minister said Cabinet was issuing a formal “request for information” to ask supermarket companies looking to enter the New Zealand market what regulatory changes were required to compete nationally.
“We want to know what it would take for one or more new grocery retailers to enter the grocery market on a national scale, or for existing competitors to grow to a sufficient size to generate a material increase in the level of competition in the grocery sector.”
Willis said she was eyeing responses from overseas chains such as Coles, Aldi and Lidl, as well as companies already in New Zealand, such as The Warehouse and Costco.
The Government would not own or run a supermarket, she said.
Willis said considerations about structural changes would be part of the process.
Economic Growth Minister Nicola Wills aims to remove “unnecessary regulatory hurdles” that discourage new entrants. (Source: 1News)
“It’s important this work and any recommendations I make to Cabinet are informed by the responses the Government receives to the request for information we are issuing today, and that resulting recommendations properly consider the potential benefits and costs of intervention, and considering potential design options.
“I do not take this step lightly.”
Further recommendations would be brought to Cabinet midway through the year once the evidence from the request for information had been considered, she said.
“No decisions have been made yet, but if Cabinet decides legislation is necessary, I expect to introduce it to Parliament by the end of the year.”
Willis took over responsibility for the supermarket delegation earlier this month after newly appointed Commerce and Consumer Affairs Minister Scott Simpson identified a conflict of interest and recused himself.
In response to today’s announcement, Labour’s commerce and consumer affairs spokesperson Arena Williams said National was “paying lip service” to its cost-of-living promises and failing to make any “meaningful change” in the grocery sector.
“Just like Nicola Willis failed to deliver on the ferries, she’s now failing to deliver on grocery prices.
“We had hoped to be able to support the Government today, expecting that after two years they would announce further action to bring down grocery prices.
“But just like all their big talk and slogans on banks, we are as disappointed as many New Zealanders will be.”
The Commerce Commission found supermarkets earn $1 million a day in excess profits because of a lack of competition. (Source: 1News)
In February, Willis said the Government could not force a third entrant into the market to break the country’s supermarket duopoly.
In September, Grocery Commissioner Pierre van Heerden said supermarket margins had increased, profits had stayed high and Foodstuffs and Woolworths remained dominant.
“We want to see more competition and sustained pressure on the major supermarkets to deliver better outcomes for consumers.”
He said in a competitive market the growth of retail margins would be limited or reduced with price competition.